Comptroller warns government debt is unsustainable

Congress and the president have credibly trimmed deficits in the past 18 months but more far-reaching actions are needed to curb long-term government debt, the comptroller general warned on Tuesday.

Laying out the Government Accountability Office’s agenda at the Association of Government Accountants National Leadership Conference, Gene Dodaro applauded the $2.1 trillion in 10-year spending cuts enacted under the 2011 Budget Control Act and the $600 billion in new revenue under the recently enacted tax relief bill. “If we stick to it, spending will be lower than at any time since the Eisenhower administration,” he said, “but the long-range outlook is still unsustainable.” Public debt is still 73 percent of gross domestic product, compared with only 40 percent in the 1970s through 1990s, he said.

In a separate panel, two federal experts on data mining outlined model programs for using analytics to reduce fraud and improper payments.

By 2018, Dodaro said, there will be a wave of additional federal expenses because of baby boomer retirements -- currently 8,000 per day but slated to rise to 11,000 per day. Their impact on spending on Social Security and Medicare “will be very significant,” and without more action, the debt would rise to more than 100 percent of GDP. The only time the government has owed more than the economy was producing was during World War II, he said.

The 2011 delay in raising the debt ceiling cost the government $1.3 billion in interest payments, Dodaro added. He reiterated a proposal to synchronize that decision with Congress’s policy choices on spending and revenues, rather than the current separate but irregularly timed vote. “We’re one of the few countries in the world that do it that way,” he said.

GAO in the coming months will be focused on the government’s progress in four areas: reducing improper payments; improving financial statements; shrinking the $385 billion tax gap; and curbing program overlap and duplication. Given the current budget crisis, Dodaro said, all of those are areas in which agency accountants can play a useful role.

Improper payments to ineligible recipients cost the government $107 billion in fiscal 2012, Dodaro said. Though 18 agencies are involved, the biggest problems show at the Health and Human Services Department’s Temporary Assistance for Needy Families program and the Education Department’s direct student loan program. Other agencies with related issues include the Treasury and Agriculture departments and the Social Security Administration.

A 2012 law added rigor to the internal accounting controls, he noted, and the Office of Management and Budget has launched a Do Not Pay list while holding program managers more accountable. “We will never get improper payments to zero, but we must get to acceptable levels.”

The government’s overall financial statement remains unauditable, Dodaro said, but there’s been progress since the late 1990s, when only six agencies had clean books, compared with 21 out of the 24 major departments now.

Thirty federal program areas remain on GAO’s high-risk list, which will be updated in a report set for release on Thursday. “Contrary to popular belief, you can get off the list,” Dodaro said, citing as an example the Pentagon’s improvements in processing security clearances. OMB and GAO have been cooperating in meeting with deputy secretaries for each agency on the list, he said.

The nation’s tax gap is caused mostly by underreporting of income and assets for every type of tax, he said. “It is difficult to justify revenue increases if people aren’t paying their fair share.’ He recommends that the IRS measure the gap more consistently and that it verify more tax return information through third parties, doing “compliance checks before issuing the refunds,” he said.

Duplicative or overlapping programs show up in 132 areas, from teacher training to job training, Dodaro said, noting that the third in a GAO series of reports on the subject is due in April. The report will provide a “scorecard” on how agencies have implemented previous GAO recommendations to curb duplication, as well as those suggesting revenue-producing changes such as inflation adjustments for user fees and civilian penalties. “Every dollar wasted adds to the debt,” he said. “and we all need to make a contribution.”

Among the most promising tools for preventing improper payments is data mining, a term that some consider passé, preferring “data analytics” or “advanced analytics,” to reflect the breadth of capability in standardizing data to showcase patterns that allow analysts to make reliable predictions on incidence of fraud.

In the other panel, Edward Slevin, director of computer assisted assessment techniques division at the Education Department’s inspector general’s office, gave a capsule history of the tools’ growth out of a 2003 GAO report on how the Pentagon IG’s office was detecting fraud in employee purchasing cards.

Slevin, who was then at the U.S. Postal Service, was asked to mimic that program but became frustrated when it was revealed that the data results contained too many “false positives.” Years spent putting raw data—such as grant applicants’ mailing addresses—into standardized formats and improving filters paid off when the Education Department uncovered rings of student loan fraudsters.

A prototype processing data from 15 schools uncovered criminals who would apply online for loans and distance learning courses at multiple schools, accumulating millions of dollars in illicit federal grants. In one school of 21,000 students, for example, data patterns revealed 89 ineligible recipients. His team eventually identified $181 million in probable losses due to fraud, while identifying additional perpetrators. “The Education Department has not put it in place in a way that it can be transferred to other inspectors general,” Slevin said.

Michael Wood, executive director of the Recovery Accountability and Transparency Board, said that while data analytics “is known to only a small group of people, the world will be excited if we get standards that fundamentally change how we do auditing and investigations.” His agency’s work tracking spending of stimulus money from the 2009 Recovery Act is now being broadened to include open source and “unstructured” data such as e-mail and social media. “If Facebook had been created by the CIA, no one would do it because of privacy worries, but now they do,” he said.

Quality of data is still a problem, Wood said, and databases can be expensive for government to acquire, even though commercial databases are not much “cleaner” or up-to-date.

With Recovery Act spending winding down, the board is working with inspectors general and OMB to reduce “silos” and share information on “capturing bad actors.”

The fact that Congress extended the Recovery Board’s life in the recent emergency relief bill for Hurricane Sandy, Wood said, “is a positive reinforcement that RATB techniques will provide some ongoing work for some of our capabilities.”